DiNapoli: State and local public authority debt nears $250 billion

by jmaloni

Press release

Tue, Mar 5th 2013 11:45 am

Public
authority debt increased to nearly a quarter of a trillion dollars in
the latest reported fiscal year, according to a report released
Tuesday by State Comptroller Thomas P. DiNapoli. New York relies on
authorities to undertake most borrowing on its behalf, and routinely
uses authority resources to plug state budget gaps.

"Public
authorities are an increasingly influential sphere of government, but
they still operate in the shadows with too little accountability to
the public," DiNapoli said. "The Public Authorities Reform Act of
2009 made some progress in improving oversight, but more needs to be
done to curb the state's over-reliance on public authorities
issuing debt without voter approval."

DiNapoli
found that authorities spent nearly $56 billion in the last reported
fiscal year. State authorities accounted for $35.4 billion of these
expenditures, or 63 percent of the total, while local authorities
reported $20.4 billion in spending, or 37 percent.

Currently,
New York has 1,169 public authorities, including 324 state
authorities and their subsidiaries, 837 local authorities, and eight
interstate or international authorities. In total, public authorities
employed more than 150,000 people and paid nearly $10 billion in
annual compensation, including almost 18,000 employees, or 11.6
percent, with total compensation of $100,000 or greater. By
comparison, 8.3 percent of state employees and 13 percent of New York
residents earned as much.

DiNapoli's
report found that public authorities have been repeatedly used to
help close projected deficits. The state fiscal year 2011-12 enacted
budget anticipated budget relief from state authorities totaling more
than $500 million, including revenue from transfers, cost recovery
and a charge on certain debt issuances.

The
largest source of expected authority-funded budget relief during SFY
2011-12 was $376 million, provided through $211 million in authorized
transfers from various public authorities to the state's general
fund and a $165 million transfer from the MTA's metropolitan mass
transportation operating assistance fund to the state's general
debt service fund to pay debt service typically paid from the state's
general fund.

Public
authorities also provide the state with revenues through the bond
issuance charge. In SFY 2011-12, the state collected $128 million
from the BIC. Generally, public authorities pay the BIC by building
the cost of this fee into the bond sale and paying for it over time
with interest, driving up debt costs.

Certain
public authority spending for state purposes is not included in the
state budget. This is commonly referred to as off-budget spending and
makes it difficult to accurately assess spending by both the state
and public authorities, and to evaluate the use of authority
resources for such purposes. In SFY 2011-12, the Division of the
Budget estimated that total off-budget capital spending by just three
authorities - DASNY, the Empire State Development Authority and the
Thruway Authority - had totaled $1.4 billion. For that year, public
authority off-budget capital spending represented 15 percent of the
state's total projected capital spending.

DiNapoli's
recent report on SFY 2013-14 executive budget found it would expand
the issuance of debt through public authorities by creating a new
bond financing program backed by sales tax revenues. The issuance of
such bonds would increase the state's dependence on so-called
"backdoor borrowing," rather than presenting bond act proposals
to the voters for consideration, DiNapoli concluded. The budget also
would expand the use of bonds backed with personal income tax
revenue. DiNapoli has put forth a number of reforms to rein in state
debt and put voters back in control of when debt is issued.

Public
authorities' spending and activities - including purchases,
personal service expenditures and other transactions - are not
subject to the same independent review, oversight and reporting
requirements as state agencies. The comptroller's audits of public
authorities' spending have revealed numerous examples of deficient
contracting practices, poor expenditure controls and inadequate
oversight.

The
report is based on self-reported data by public authorities to the
Office of the State Comptroller. The data, which is not independently
verified by OSC, represents the most recently reported fiscal year,
and does not reflect a common fiscal year or the state's fiscal
year.